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Unaudited summary results announcement and cash dividend declaration for the six months ended 31 December 2023
OUTSURANCE GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2010/005770/06
ISIN: ZAE000314084
Share code: OUT
(OGL or the Group)
UNAUDITED SUMMARY RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
FINANCIAL PERFORMANCE HIGHLIGHTS
Normalised earnings R1 411 million up 0.5%
P&C gross written premium R16 110 million up 22.5%
P&C annualised new business premium R4 814 million up 38.8%
Ordinary dividend per share 61.2 cents up 7.7%
OVERVIEW OF GROUP RESULTS
The reporting period reflects the first-time adoption of IFRS 17. The adoption of IFRS 17 has resulted in a significant change in the accounting policies of
the Group and in particular, the measurement approach for the Life insurance operation. Comparative results have been restated as a result of the
IFRS 17 transition.
OUTSURANCE GROUP LIMITED (OGL)
The table below sets out the sources of normalised earnings as attributed to the OHL and ultimately OGL Groups:
Year
Six months ended ended
31 December 30 June
2022 2023
R million 2023 Restated % change Restated
OUTsurance 923 955 (3.4%) 1 884
Youi Group 556 658 (15.5%) 1 396
OUTsurance Life 70 13 >100% 142
OUTsurance Ireland (59) (2) (>100%) (56)
Administration services1 20 (17) >100% (35)
Central and consolidation adjustments 36 (8) >100% (21)
OUTsurance Holdings Limited 1 546 1 599 (3.3%) 3 310
Non-controlling interest (139) (157) 11.5% (321)
Central/Treasury Company 4 (38) >100% (50)
OUTsurance Group Limited 1 411 1 404 0.5% 2 939
1 Included the normalised loss of OUTvest in the prior period of R15 million and the 2023 financial year of R28 million. OUTvest was
disposed of effectively 1 February 2024 and the results for the six-months under review do not include any profit or loss related to
the business.
The improvement in the Central and RMI Treasury Company profit component is associated with a large reduction in head-office cost resulting from the
simplification of the OGL Group following the listing transition in December 2022. This amount includes interest earned on surplus financial assets
coupled with the equity accounted earnings from the portfolio investments.
RMI Treasury Company is in the process of concluding the disposal of RMI Investment Managers Group, excluding the Group's investment in PolarStar
Management, to Momentum Metropolitan Holdings. The financial effects of the disposal will impact the results of the second half of the financial year.
The OHL Group disposed of its investment in OUTvest with effect 1 February 2024.
OUTSURANCE HOLDINGS LIMITED (OHL)
The table below sets out the key financial outcomes of the consolidated OHL Group:
Year
Six months ended ended
31 December 30 June
2022 2023
R million 2023 Restated % change Restated
Consolidated operating performance - OHL
Normalised earnings 1 546 1 599 (3.3%) 3 310
Operating profit 1 788 2 003 (10.7%) 4 167
Investment income generated 746 505 47.7% 1 091
Normalised ROE1 26.1% 30.2% 29.8%
Group cost-to-income ratio 30.5% 28.9% 30.2%
Property and Casualty insurance activities2
Gross written premium4 16 110 13 153 22.5% 27 559
Insurance revenue3 14 888 12 437 19.7% 25 977
Net earned premium4 13 761 11 357 21.2% 23 726
Annualised new business premium written 4 814 3 469 38.8% 7 710
Operating profit 1 643 2 030 (19.1%) 4 086
Normalised earnings 1 420 1 611 (11.9%) 3 224
Claims ratio4 59.1% 54.4% 54.3%
Insurance cost-to-income ratio4 30.4% 28.3% 29.4%
Combined ratio4,5 (%) 90.0% 83.5% 84.4%
Life insurance activities
Operating profit/(loss) 57 (15) >100% 145
Normalised earnings 70 13 >100% 142
Value of new business written 37 (12) 15
Embedded value 1 843 1 421 1 878
1 Attributable to ordinary shareholders.
2 Aggregate results of OUTsurance/Youi Group/OUTsurance Ireland.
3 IFRS 17 naming convention and equivalent to gross earned premium under IFRS 4.
4 Management definitions related to key performance metrics for P&C insurance operations.
5 After Homeowners profit distribution paid to FirstRand and insurance finance expense.
The OHL Group's normalised earnings was 3.3% lower at R1 546 million. This reduction in earnings was driven by the impact of higher natural perils
claims incurred, most prominently in Australia.
Also impacting the results is a material increase in the cost of the OUTsurance South African Employee Share Option Scheme (ESOP) following the
increase in the OGL share price over the six month period under review. The ESOP scheme is marked to market and is a cash-settled scheme which
creates volatility in the share-based expense and consequently in the cost-to-income ratio. We are in the process of replacing the ESOP with a Conditional
Share Plan (CSP) which will remove volatility in the cost of the share-based expense. The volatility of the share-based payments expense will therefore
rebase incrementally over the next two financial years before being fully replaced by the CSP scheme. The share-based payments expense was
R293 million higher than the comparative six months. The OHL Group's operating earnings would have been R293 million higher if this expense is
adjusted for and similarly normalised earnings would have been R214 million (post-tax) or 13.4% higher.
OUTsurance Ireland incurred R59 million in start-up losses during the six months under review. Expenses are escalating as the business is
operationalising for the launch phase. The loss increased from R2 million in the comparative period.
The salient performance features of the P&C insurance activities are as follows:
- Gross written premium grew by a strong 22.5% which is testament to good operational execution, navigating effectively through the high inflationary
environment and the contribution made by new business initiatives.
- Annualised new business increased by 38.8% which points to an accelerated new business trend over the period and supported by a persistently high
inflationary environment.
- The claims ratio which increased from 54.4% to 59.1% is attributed to R678 million higher natural perils claims incurred by Youi. Youi's working loss
ratio (excluding natural perils) improved from 51.9% to 50.8%, which illustrates that the deterioration was fully accounted for by the higher natural
perils. OUTsurance delivered improved claims ratios for both the Personal and Business segments.
- The P&C insurance cost-to-income ratio of 30.4% is distorted by the share-based payments expense. The start-up expenses of OUTsurance Ireland are
contributing to the higher expense base and ratio of the Group. Ignoring the increased share-based payments expense and Ireland costs, the P&C
cost-to-income ratio would be 27.8%. The mix effect of Youi's faster growth in the Group and its higher inherent cost ratio, also contribute to the
higher cost-to-income ratio.
The life insurance business delivered a much improved operating result following the impact of stronger growth achieved in the funeral market place and
favourable yield movements compared to the comparative six months.
LOOKING AHEAD
Over the last year we have taken significant action to rationalise our portfolio of products and channels to ensure that our growth strategy is focussed to
where we optimise our return on capital. This year's focus is to continue investing in our core businesses where we see opportunities for organic growth
and profitable market share expansion. Our teams are focused on cost optimisation as a core ingredient to pricing competitively.
We look forward to a successful market entry of OUTsurance Ireland over the next quarter. Our entry will be measured to ensure that systems and
processes, pricing and customer service are streamlined to form a foundation for a successful business.
Our new initiatives will continue to emerge from losses and contribute to Group profitability. A particular focus is on the OUTsurance Business Broker
initiative and the profitability of business written in the BZI channel.
We expect that the South African economy will continue to deliver range bound economic growth. We expect some real growth opportunities stimulated
by higher natural perils claims and solar penetration. Our focus is to drive competitive alternatives for customers through the optimisation and efficiency
of our core businesses.
The Australian economy is in a stronger position and offers real growth opportunities in the insurance sector where shopping activity is stimulated by the
high inflationary environment. As a challenger brand, we remain excited by Youi's growth prospects.
We expect that premium inflation will start normalising over the next 12 to 24 months with a sticky near term outlook.
Weather patterns will continue to impact our earnings volatility in the Group and periods of high weather related losses coupled with reinsurance pricing
disruption will drive higher premium inflation in the markets in which we operate. We look forward to the long-term earnings diversification that the
OUTsurance Ireland opportunity offers as well as organic diversification enabled through increased Business, CTP and life insurance penetration.
CASH DIVIDEND DECLARATION
Notice is hereby given that an ordinary gross interim cash dividend of 61.2 cents per OUTsurance Group Limited ordinary share, payable out of income
reserves, was declared on 18 March 2024 in respect of the six months ended 31 December 2023.
These dividends will be subject to Dividend Withholding Tax at a rate of 20%, which will result in a net dividend of 48.960 cents per ordinary share for
those shareholders who are not exempt.
The company's tax reference number is 9469/826/16/9. Its issued share capital at the declaration date comprises 1 533 388 983 ordinary shares.
Shareholders' attention is drawn to the following important dates:
Last day to trade in order to participate in the ordinary dividend Tuesday 09 April 2024
Shares commence trading ex-dividend on Wednesday 10 April 2024
The record date for the payment of the dividend will be Friday 12 April 2024
Dividend payment date Monday 15 April 2024
No dematerialisation or rematerialisation may be done between Wednesday 10 April 2024 and Friday 12 April 2024 (both days inclusive).
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Six months ended Year ended
31 December 30 June
2022 % 2023
R million 2023 Restated change Restated
Insurance revenue1 15 328 12 865 19.1% 26 833
Insurance service expenses1 (12 388) (9 485) 30.6% (19 714)
Net expenses from reinsurance contracts held1 (605) (919) (34.2%) (1 989)
Insurance service result 2 335 2 461 (5.1%) 5 130
Non-insurance related income1 244 197 23.9% 450
Net investment income 805 561 43.5% 1 198
Investment income 110 97 13.4% 208
Interest income on financial assets using the effective interest method 659 357 84.6% 911
Net gain from fair value adjustments on financial assets 29 104 (72.1%) 80
Expected credit losses reversed/(expensed) on financial assets 7 3 >100% (1)
Net insurance finance expenses1 (139) (139) - (94)
Finance expenses from insurance contracts issued1 (205) (172) 19.2% (103)
Finance income from reinsurance contracts held1 66 33 100.0% 9
Fair value adjustment to financial liabilities (74) (91) (18.7%) (196)
Net insurance and investment result 3 171 2 989 6.1% 6 488
Marketing and administration expenses1 (928) (645) 43.9% (1 633)
Finance costs (17) (8) >100% (40)
Equity accounted earnings/(losses) 33 (1) >100% 20
Profit on change of shareholding in investment in associates 471 - >100% 7
Profit on sale of associates 82 57 43.9% 57
Impairment of investment in associates - - - (23)
Profit before taxation 2 812 2 392 17.6% 4 876
Taxation1 (738) (718) 2.8% (1 459)
Profit for the period 2 074 1 674 23.9% 3 417
Profit attributable to:
Ordinary shareholders 1 891 1 453 30.1% 2 980
Non-controlling interests 183 221 (17.2%) 437
Profit for the period 2 074 1 674 23.9% 3 417
Earnings per share (cents) 123.6 94.8 30.4% 194.5
Diluted earnings per share (cents) 122.0 93.9 29.9% 190.8
1 The prior periods have been restated due to the adoption of IFRS 17.
COMPUTATION OF HEADLINE EARNINGS
Six months ended Year ended
31 December 30 June
2022 % 2023
R million 2023 Restated1 change Restated1
Earnings attributable to ordinary shareholders 1 891 1 453 30.1% 2 980
Adjustment for:
Profit on dilution of associates (471) - (1)
Profit on disposal of associates (78) (47) (47)
Realised foreign exchange gain on sale of investment in associates (5) - -
Loss/(profit) on disposal of property and equipment 1 - (4)
Profit on distribution of associates - (1) -
Impairments of investments in associates - - 17
Loss on write-down of intangible asset - - 13
Tax effect of headline earnings adjustments 63 9 5
Headline earnings attributable to ordinary shareholders 1 401 1 414 (0.9%) 2 963
1 The prior periods have been restated due to the adoption of IFRS 17.
COMPUTATION OF NORMALISED EARNINGS
Six months ended Year ended
31 December 30 June
2022 % 2023
R million 2023 Restated1 change Restated1
Headline earnings attributable to ordinary shareholders 1 401 1 414 (0.9%) 2 963
Adjustment for:
Losses/(gains) on derivative financial instruments relating
to capital investments 10 - (3)
Group treasury shares (2) (12) (25)
Amortisation of intangible assets relating to business combinations 2 2 4
Normalised earnings attributable to ordinary shareholders 1 411 1 404 0.5% 2 939
1 The prior periods have been restated due to the adoption of IFRS 17.
COMPUTATION OF EARNINGS AND DIVIDEND PER SHARE
Six months ended Year ended
31 December 30 June
2022 2023
R million 2023 Restated1 % change Restated1
Earnings attributable to ordinary shareholders 1 891 1 453 30.1% 2 980
Headline earnings attributable to ordinary shareholders 1 401 1 414 (0.9%) 2 963
Number of shares in issue (millions) 1 533 1 532 - 1 532
Weighted average number of shares in issue (millions) 1 530 1 532 (0.1%) 1 532
Dilutory impact on earnings (24) (14) 71.4% (57)
Dilutory impact on headline earnings (23) (14) 64.3% (42)
Earnings per share (cents) 123.6 94.8 30.4% 194.5
Diluted earnings per share (cents) 122.0 93.9 29.9% 190.8
Headline earnings per share (cents) 91.6 92.3 (0.8%) 193.4
Diluted headline earnings per share (cents) 90.0 91.4 (1.5%) 190.7
Dividend per share
Interim dividend (cents) 61.2 56.8 7.7% 56.8
Final dividend (cents) - - - 78.0
Special dividend (cents) - - - 8.5
Total dividend per share (cents) 61.2 56.8 7.7% 143.3
1 The prior periods have been restated due to the adoption of IFRS 17.
COMPUTATION OF NORMALISED EARNINGS PER SHARE
Six months ended Year ended
31 December 30 June
2022 2023
R million 2023 Restated1 % change Restated1
Normalised earnings attributable to ordinary shareholders 1 411 1 404 0.5% 2 939
Number of shares in issue (millions) 1 533 1 532 - 1 532
Weighted average number of shares in issue (millions) 1 533 1 532 - 1 532
Dilutory impact on normalised earnings (23) (14) 64.3% (40)
Normalised earnings per share (cents) 92.1 91.6 0.5% 191.9
Diluted normalised earnings per share (cents) 90.6 90.7 (0.1%) 189.3
1 The prior periods have been restated due to the adoption of IFRS 17.
ADMINISTRATION
OUTsurance Group Limited (OGL)
(formerly Rand Merchant Investment Holdings Limited (RMI))
Registration number: 2010/005770/06
JSE ordinary share code: OUT
ISIN code: ZAE000314084
Directors: Chairman: HL Bosman; Lead Independent: K Pillay
Independent: B Hanise, ET Moabi, GL Marx, JA Teeger, JE van Heerden, MM Mahlare, M Morobe, RSM Ndlovu, SV Naidoo
Non-executive: A Kekana, JJ Durand, WT Roos; Executive: MC Visser (CEO), JH Hofmeyr (CFO); Alternates: F Knoetze, UH Lucht.
During the six months ended 31 December 2023, Messrs Hedding and Burger stepped down as directors.
Secretary and registered office: JS Human
Physical address: 1241 Embankment Road, Zwartkop Ext 7,
Centurion, South Africa, 0157
Postal address: PO Box 8443, Centurion, South Africa, 0046
Contact: investorrelations@out.co.za
Web address: https://group.outsurance.co.za
Sponsor: (in terms of JSE Listings Requirements) Rand Merchant Bank
(a division of FirstRand Bank Limited)
Physical address: 1 Merchant Place, Corner of Fredman Drive and
Rivonia Road, Sandton, 2196
Transfer secretaries: Computershare Investor Services Proprietary Limited Physical address: Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Postal address: Private Bag X9000, Saxonwold, 2132
Telephone: +27 11 370 5000 Telefax: +27 11 688 5221
ADDITIONAL INFORMATION
This results announcement contains certain forward-looking information with respect to OUTsurance. These statements and forecasts involve risk and
uncertainty as they relate to events and depend on circumstances that occur in the future. There are various factors that could cause actual results or
developments to differ materially from those expressed or implied by these forward-looking statements. Consequently all forward-looking statements
have not been reviewed or reported on by the Group's external auditors.
The contents of this results announcement are the responsibility of the board of directors of the company. These summary interim results have not been
audited.
Shareholders and/or investors are advised that this results announcement represents a summary of the information contained in the interim results and
does not contain full or complete details.
The interim results are available for viewing on OUTsurance's website at https://group.outsurance.co.za/financial-results/reports-and-results or at
https://senspdf.jse.co.za/documents/2024/jse/isse/OUTE/OUT24Int.pdf
Any investment decisions by shareholders and/or investors should be based on a consideration of the interim results as a whole and shareholders and/or
investors are encouraged to review the interim results, which are available for viewing on the JSE's website and on the company's website as set out
above.
The interim results are also available for inspection, at no charge, at the registered office of the company (1241 Embankment Road, Zwartkop Ext 7,
Centurion, South Africa, 0157) and at the offices of OGL's Sponsor, Rand Merchant Bank (a division of FirstRand Bank Limited) (1 Merchant Place, Corner
Fredman Drive and Rivonia Road, Sandton) from 09:00 to 16:00 weekdays. Shareholders and/or investors may request copies of the interim results from
the company secretary at humansch@out.co.za.
Centurion
18 March 2024
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 18-03-2024 08:00:00
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